...for as long as it takes
By Jim Garamone WASHINGTON -- After a slow start, the DoD family housing
privatization program is finding its legs and service members
should see a rapid improvement in base housing throughout the
United States. In fact, some 60,000 military housing units
should be privatized by the end of fiscal 2000.
The program, started in fiscal 1996, is designed to speed up
refurbishing current quarters and build new housing, said DoD
program coordinator Joe Sikes. DoD estimates it would need 30
years under the old military construction system to deal with
the 180,000 substandard housing units it has today. Under the
privatization program, officials believe they can work off the
backlog in 10 years.
About 1,000 quarters have been privatized so far -- 404 in a
Navy program at Corpus Christi, Texas; 185 at Naval Station
Everett, Wash.; and 420 at Lackland Air Force Base, Texas.
DoD issued requests for proposals or qualifications for 4,609
more units. Congress approved the projects, and construction
will probably start this fiscal year.
They are at Fort Carson,
Colo.; Marine Corps Logistics Base, Albany, Ga.; Camp Pendleton,
Calif.; Robins AFB, Ga.; Naval Air Station Kingsville, Texas;
and another project in Everett.
DoD has notified Congress it would like to issue requests for a
further privatization of 21,311 housing units. It is drafting
solicitations for another 10,662 units and will deliver this
request to Congress this year. In addition, 26 other projects
covering 50,000 units are currently under consideration. Not all
will be privatized, officials said, but they will be examined.
Under the basic program, private companies build or refurbish
and then manage family housing units. DoD puts in a certain
amount of money, and contractors then approach financial
institutions to borrow against the project. For every dollar DoD
invests, under this program, the private sector will sink in
four or five.
"We can turn over our housing units to the private sector, who
can go get private-sector financing," said Sikes. "The private
sector can then fix up the houses or build new houses and, in
exchange, get rent from the service members who live in the
houses. Instead of paying all this [military construction] money
and all the operations and maintenance money, we pay the
allowances to the service members, and the private sector [has
the incentive] to build nice enough housing to attract service
members."
Service members' housing allowances are divided into shares for
rent and utilities. The Army and Air Force compute privatized
housing rents by estimating the monthly cost of utilities and
subtracting 110 percent of it from the member's housing
allowance. For example, if the utilities estimate is $100 and
the member's housing allowance is $500, the services would allot
$110 for utilities and $390 for rent.
Service members pay their housing allowances to the contractor,
who can use only the rent share to turn his profit. Using the
example above, a family with a $70 utility bill in a month is
due a $40 refund from the contractor. Similarly, if the utility
bill is $125, the family owes the $15 difference. The private
company will analyze local utility costs annually.
The Navy is still wrestling with how it will structure its
program. In the two Navy projects already completed, there are
some out-of-pocket expenses for utilities, but this may change,
defense officials said.
There are two types of privatization -- on-base and off-base.
Contracts for on-base programs are let for 50 years. "This is an
Office of Management and Budget requirement," Sikes said. DoD
may give the land or housing to private companies or lease it to
them.
Off-base housing is where the private company buys its own land
in the civilian community and builds the houses. These contracts
can be for any length of time. "The first two Navy projects were
10-year deals," Sikes said. "[The private companies] agreed to
provide the housing for 10 years and we are a one-third partner.
At the end of that time we split up the proceeds and do the
whole thing over again."
Defense business isn't as secure as it once was because of base
closures, downsizing and other changes. DoD offers some security
to wary private companies concerned about incurring losses to
such unforeseeable circumstances, Sikes said.
The program started slowly, he said, because DoD had to develop
expertise in real estate finance and real estate development.
The department hired consultants to help structure the real
estate deals and evaluate the proposals.
"We spent about $7.5 million on consultants in the first two
years, trying to develop these deals in over 40 places," Sikes
said. He said the experts helped DoD save $11 million at
Lackland AFB alone. "We originally expected [the Lackland
project] to cost us $17 million. It ended up costing us $6
million."
Officials said they expect more savings as the program goes
along. Fort Carson's 2,663-unit project was expected to cost the
government $15 million. "Even in the preliminary estimates that
was brought down to $10 million," Sikes said.
He said the whole program "is a major cultural change" for DoD.
There were two reasons this was a hard sell within the
department. "First is that you have this private sector housing
on base -- something that we haven't had in the past. Second,
the service members themselves don't just move into housing and
then have no responsibility to pay anything. They are actually
going to get the allowances and then they have to turn them over
to the developer."
Sikes said this creates a host of administrative problems, one
of which is how are companies paid. He said the services are
leaning toward making payments through the allotment system.
Making sure service members understand the benefits of this
program is also crucial. "We've got to make sure service members
understand that they are getting better housing through this,"
he said. "It's not something that is an extra requirement on
them.
The following is a list of family housing privatization efforts.
Projects awarded:
In solicitation:
Congress has been notified:
Under development:
Sent in by Veterans News and Information Services
American Forces Press Service
Corpus Christi, Texas (Navy) 404 units
Everett, Wash. (Navy) 185
Lackland Air Force Base, Texas 420
Total -- 1,009
Fort Carson, Colo. (Army) 2,663
Marine Corps Logistics Base Albany, Ga. 114
Camp Pendleton (Marines) 712
Robins AFB, Ga. 670
Everett, Wash. (Navy) 300
Naval Air Station Kingville, Texas 150
Total 4,609
South Texas (Navy, regional) 811
San Diego (Navy, regional) 11,020
Naval Air Station Lemoore, Calif. 1,590
Naval Station New Orleans 613
Fort Hood, Texas (Army) 5,482
Naval Air Station Brunswick, Maine 967
Elmendorf AFB, Alaska 828
Total 21,311
Kirtland AFB, N.M. 1,890
Dyess AFB, Texas 402
Mountain Home AFB, Idaho 1,525
Patrick AFB, Fla. 999
Chicopee, Mass. (Marines) 194
Newburgh, N.Y. (Marines) 150
Marine Corps Base Twentynine Palms, Calif. 1,704M
Beaufort Marine Corps Air Station, N.C. 719
Camp Lejeune, N.C. (Marines) 3,079
Total 10,662
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